Marketplace Disruption: The Myth of Perpetuity and Lifecycle Realities

Does anyone really believe his or her business will last indefinitely? If not, why do we act like it will? What is the reality of business lifecycles, and how do lifecycle myths help us fulfill Schumpeter’s predictions?

This chapter is from the book

The “S” Curve Theory of Business Lifecycle

Anyone who has ever read about business growth has read about “S” curves. “S” curves are very popular, in part, because they
do a great job of describing many biological systems. Business theories that reflect what we see around us in everyday life
are easy to accept and need only have a few good analogies to be wholeheartedly believed. However, businesses are not biological
systems, and they are not required to behave like them.

Most of the pioneering work on “S” curves was done by biologists who were describing the behavior of viruses. Even Jonas Salk,
inventor of the Salk vaccine for polio, wrote extensively on “S” curves as a descriptor for how viruses compete and mutate
to propagate and succeed. This laid the groundwork for business academics and professionals to use “S” curves as tools for
describing business behavior. After all, businesses compete and desire to propagate, which is similar to viruses, so shouldn’t
the analogy hold true?

According to the “S” curve theory, businesses start with a very slow growth rate, taking substantial time to demonstrate business
efficacy. Early on, growth is challenged by the need to find a customer or two willing to consider the new business. Eventually,
growth explodes as customers find the solution more valuable than other solutions. In a relatively short time, revenue begins
to exceed expectations. However, this rapid growth does not last forever because new competitors enter, making what once was
valuable less so.

So what should a business do once the “S” curve starts to become level? Introduce something new, of course! A new product
or a new version of an existing product creates a new curve. This new curve, built on the first-generation solution, means
revenue doesn’t start at zero. Instead it continues to grow.

According to the “S” curve theory, as shown in Figure 1.2, no business need ever decline. By maintaining a constant stream of replacement products, businesses can generate continuous
growth. Multiple curves can blend into a nice northeasterly line of increasing revenue. A business could live into perpetuity
this way!

Over the last 30 years, there have been many articles and books that offer management guidelines for utilizing “S” curves.
They present a number of multiple theories and often include case studies that describe how the researchers applied the “S”
curve concept. Each theorist claims that using multiple curves allows for “jumping the curve,” which means to jump out of
curve A and into curve B before the business starts to observe a revenue decline.